Market Report January 2012:
We wish all of our customers a very happy, healthy and prosperous New Year and look forward to continuing our relationships and business during 2012.
Overview:
There was a definite slow down during the 4th quarter of 2011 and finally we started to see the long awaited correction of prices, especially on naturals. In recent weeks, however, we have seen noticeable resistance from sellers at origin to these lower levels and in certain instances prices have actually started to move back up slightly.
In both USA and Europe there is a worrying lack of free stock of certain raw materials, as many stockholders have been reluctant to purchase when all indices were pointing towards price reductions and the differential between prices at origin and spot has widened.
The on going concern of the viability of the Euro has seen a definite shift of focus to the US Dollar strengthening against other currencies, including the Renminbi and Rupee, which may give exporters at origin a little more room to reduce their US Dollar prices, but this may take a while to come through.
With the largest Chinese festival of the year soon to start, Spring Festival , there will be serious disruption to exports during the period of January 19th to January 30th, so unless goods have already been shipped, the next expected shipment date will be early to mid February with arrival in to store around mid- late March. As the supply chain was already tight, this pause in exports from China may lead to temporary shortages of product, which may not be corrected until end of March/April.
Essential oils
Demand during the last quarter was less than in previous quarters, but was still at a reasonable level, especially when considering the economic gloom reported everyday by the media.
It has been noticeable during the first half of January that buyers have been attracted by the more favourable prices and orders have been placed for requirements for the next 3-6 months and their requirement can be reviewed in time for the next main crop period of June/July.
Aroma Chemicals
Demand was slow during the last quarter, but prices have remained generally firm, with some products actually increasing in price. Gum Turpentine prices remain low and the down stream products do look particularly attractively priced at present.
Recently there has been an increase in activity and a number of large orders have been placed.
Aniseed/Anethol – Chinese
Aniseed oil - Recently prices at origin have increased due to strong demand. Also, farmers are not willing to sell the Aniseed spice at low prices, which is restricting the amount of supply available for the production of oil.
Anethol – Prices remain steady, closely linked to the price of Aniseed.
Cardamom oil
Guatemala- Availability of good quality oil is still limited, but after a price decline during November and December, prices have started to increase (slightly) as buyers once again look to cover their requirements.
India– Supply is good and prices look very attractive against those from Guatemala.
Cinnamon Leaf Oil
Prices have declined, which is good news for buyers and recently good size orders have come in to the market. We would recommend customers to look at their requirements, as prices do look interesting.
Citronella oil 85/35% min. Chinese
After a price decline of about 15%, there is a definite reluctance of sellers at origin to reduce prices further. Demand is slow and supply is good and we believe the price will not increase in the near future.
Cloves and Derivatives
Total availability of crude clove oil is predicted to be less than the worldwide demand, but prices remain under pressure as the market remains quiet. If demand picks up, we could see prices increase very quickly.
Madagascar– Distillation of Clove Leaf oil stopped in November 2011 and farmrs/exporters have now switched their attention to the Clove Bud crop, where demand is very strong and prices are firm.
Clove Leaf oil production may only start again in April/May, but we are monitoring the situation and will advise you if there is any change.
Di Ethyl Phthalate(DEP)
The price of Phthalic Anhydride has unexpectedly increased by around 30% during the past 4-6 weeks, which has caused a significant jump in the price of DEP from India.
Supply is good and demand steady, but the new prices are causing problems for many customers, especially those that failed to place contracts and instead are purchasing from the spot market.
Eucalyptus Citriodora
Brazil– During the past few months supply has improved and we have seen more attractive prices coming from all of the major exporters. The recent strengthening of the USD against the Real has also helped the reduction of price.
China– The quantity available from China is limited, but we have seen prices reduce to remain close (but still not as competitive) to those from Brazil.
Eucalyptus oil
Weaker demand during November and December pushed Chinese suppliers to offer more attractive prices and over the past few months we have seen prices decline about 20% from their peak. Recently there has been much more buying activity and prices have now stabilized at these lower levels.
Supply is good and unless the market is influenced by speculators in China, we expect prices to remain around the current level.
Geranium oi Egyptian-
With prices falling so dramatically from their peak of USD500 to around USD125-130/kg at the end of December, it was no surprise to see a flurry of orders come in to the market and recently prices seem to have stabilized. With the quantity produced from the 2011 crop reaching around 160mt (double the average crop), we believe that prices will remain under pressure until a majority of the stock held by Egyptian farmers/exporters is sold.
Chinese– Supply remains limited due to the crop in 2011 being considerably less than an average year, but prices have declined by around 10% mainly in response to the lower prices from Egypt, even though the products from the two origins are not directly interchangeable.
Guaiacwood Oil – Paraguay
Product is sourced from areas where accessibility is very difficult and supply has been interrupted due to the drought in Paraguay, which has caused the river levels to drop making it very difficult for ships to navigate the river and deliver cargo from the forest area to the port.
Stocks in Europe are limited, but sufficient to keep up with current demand. If demand suddenly increases, this may cause a problem with supply. Good planning is essential to avoid delivery issues.
Prices remain high and stable and we see little reason to see any change to pricing in the near future.
Litsea Cubeba – Chinese
Prices have declined by around 20% from their peak of 2011, but even at the more attractive prices demand remains weak. New crop is due July/August and we do not expect to see any dramatic change to the price. Availability is good, but we have seen a number of lots where the quality is not up to the usual standard and buyers should be careful when purchasing from unknown supply sources.
Menthol/Peppermint oil – Indian/Chinese
During November and December prices eased back, as speculators cashed in and realized their profits before the year end. At the beginning of January prices on the MCX in India were still reported lower, but since January 10th the speculators seem to have re-entered the market and purchasing once again, pushing up prices.
This coincides with the Chinese New Year and when China re-opens at the end of January it looks like they will be faced with having to pay much higher prices for the Mentha Powder from India.
With prices constantly fluctuating, many importers/stockists have reduced their purchasing and available stock in Europe is limited.
Orange oil/terpenes
With the Florida crop now coming on stream, this has improved the supply side and with demand being rather slow, prices have shown a weaker tendency. Some customers took the decision in 2011 to ‘wait and see’ and it seems that their decision was the right thing to do. Whilst current prices are down considerably from the peak of 2011 they are still significantly higher from the levels of 2009 and it could be that the current price levels will become the new standard.
We are still awaiting confirmation of the crop size from Florida, but understand that the crop is looking good, with no expected problems. We are hoping that freeze conditions does not affect Florida in the next month or two.
Patchouli oil – Indonesian
Demand has been sluggish over the past few months and prices have declined by about 5-10%.
Supply is good. Exporters do not report any adverse weather problems.
Petitgrain Oil
In recent years supply of oil has been interrupted because of drought reducing the water level in rivers, making it increasingly difficult (if not impossible) for boats to navigate along the river and deliver their cargo to the main exporting ports and 2011/2012 seems to be one of the worse.
The lead time from placing of an order with origin to delivery of goods in our store is now taking around 3 months and we do recommend that customers plan their requirements well in advance.
Spearmint Oil – Chinese
The reduced crop of 2011 has kept supply limited and prices firm and we see no chance of any change to this situation until the new crop in June/July.
Tea Tree oil – Australian
Demand remains weak, yet prices from Australian exporters remain unchanged.
The continued strengthening of the Aussie dollar is impacting on prices in Europe, giving the illusion that the price in Europe is increasing. Unless there is a sudden increase in demand we expect prices at origin to remain stable. Stocks in Europe and USA have decreased as many importers have chosen not to replenish stock whilst demand remains slow.
